American Airline’s pilot scheduling snafu could cost $10 million

1BUSINESS

The fallout from American Airline’spilot scheduling glitch could cost the company $10 million.

The figure comes from a recent JPMorgan report estimating the total price of the airline’s decision to double pay for pilots who have offered to fill in around the December holidays.

Last week, the Allied Pilots Association, which represents American Airlines(AAL) pilots, revealed that thousands of holiday flights were without pilots because asystem scheduling error had accidentally given too many employees time off in December.

To fix the problem, American and the union negotiated a pay increase for pilots who offered to fly the unassigned flights. American and the union have said no flights will be canceled.

The APA said on Sunday that those employees who will be piloting flights affected by the glitch will make 200% wages — an increase from the 150% discussed earlier.

“We’ve reached an agreement that we believe will ensure that our customers’ holiday travel plans are not disrupted while also recognizing our pilots’ extra efforts to help resolve this challenge,” the APA said.

JPMorgan airlines analyst Jamie Baker wrote in the report that “initially, we were somewhat disappointed by the 200% headline.”

“After all, the existing contract affords management the discretion to pay 150% for these types of events,” he said.

Ultimately, however, Baker concluded that the decision to double pilots’ pay could stave off bad press and passenger anxiety, adding that the “difference between a 150% and a 200% pay rate [is] sufficiently immaterial.”

Baker reached the $10 million figure by estimating pilot pay in December as a percentage of American’s quarterly wages and benefits and determining that about 1,500 flights will be flown by pilots making 200% pay.

Helane Becker, an airline analyst for Cowen, was harsher on the decision. She wrote on Monday that the move “created no goodwill for American as in our view the union continues to take advantage of their company.”

American Airlines said it generally does not comment on analyst reports.